No One Agrees On What's Moving The Markets Today

On a day with a big data announcement, like today, one might expect that the various news outlets might generally agree on what's moving the markets.

Not so much.

According to CNBC (please overlook the dreadful prose), "[s]tocks opened lower [today] after the monthly government non-farm payroll rose less than expected and as traders continued to closely monitor events in the euro zone as the G20 Summit in France took place." Fox Business agreed: "Stocks were off to a gloomy start in the last trading day in what has been a volatile week for Wall Street as traders mulled fresh data on the jobs market and continuous developments on Europe's debt crisis." Bloomberg's spin was slightly different: "Stocks, the euro and Italian bonds fell as a disagreement on boosting the International Monetary Fund's resources to fight Europe's debt crisis overshadowed a drop in the U.S. jobless rate." The Street's headline focused on NFP and said that "Stocks Fall on Lackluster Jobs Data." CNN emphasized jobs too: "U.S. stocks opened slightly lower Friday following a disappointing jobs report."

Which was it — NFP or Europe? The answer is both and neither. On more ordinary days, what's going on is even more elusive.

I've sat on enough fixed income trading desks to know that there are always many reasons why people trade and those reasons are often unknown and concealed. I have no reason to believe that equity traders are any more forthcoming. Obfuscation is common — in all directions. Even flow trading desks never have a great handle on what's driving whom.

One common objection to the complete digitization of trading is the difficulty of monitoring "flow" and the reasons for it without the human connection. And there is certainly value in that for traders. But that value is easily overstated.

A big trade after a big number might be in response to the number. But it might also have been planned before and delayed to get past the risk of the number. Or it might simply reflect redemptions due to poor performance, or something else.

Back in the days when I was routinely asked about flow and called upon to interpret what's driving whom on a day-to-day and sometimes moment-to-moment basis, I was careful to talk to traders, read the latest news and collect whatever other information I could before opining. But, even at best, the information I offered had to be treated very tentatively.

Information is cheap but meaning is expensive.

The traders I talked with might not be seeing all the flows. Or they might be longer (or shorter) than they'd like and are biasing their commentary accordingly. Or maybe they're distracted about something. Or perhaps they're angry with me for not pushing what they had to sell hard enough and freezing me out from the best intel they had. Everybody has an ax to grind.